The American Dream: 21st Century Serfdom

It can all be yours for the taking…just sign your name on the dotted
line at every step of the way, and you too can have your very own
version of the American Dream.

This is supposedly the keys to happiness and success and achieving “a better standard of living than our parents.”

It’s a grand lie, designed to get the average person to pursue this
dream so as to enslave themselves into the system…a benign, subversive
system of hidden serfdom.

Welcome to debt slavery.

And who are our Feudal Overlords?

The bankers.

And how do they exactly trap us into forced servitude for their profit?

The twin tools of Fractional Reserve Banking and Fiat Currency.

Wanna start a business?

Take out a business start up loan!

How do you pay for the overhead of running your business? Here’s a business credit account!

Wanna buy a house?

Here’s a 30 year mortgage…and don’t forget your mortgage insurance
plan, so in case you are injured or laid off, you won’t have to make
your payments for up to one whole year! (Gee, you bankers are just SO
generous!).

Wanna get an education?

Here’s a student loan that will take you 20 years to pay off after
you’ve graduated and still can’t find a job during the current
recession.

Understand that our modern economy is based not on MONEY…but on DEBT.
An obligation to promise to paying the bankers – WHO DID NOTHING MORE
THAN TYPE A NUMBER INTO A COMPUTER IN THEIR BANK LEDGER SHEET PROGRAM
AND – VOILA! – you too can sign up for 21st century serfdom to achieve
the “American Dream!”

But don’t look at the Bankers in your local neighborhood bank as your
Feudal overlord…he’s just a mid-level overseer of the Lord’s vast
estates.

See, his bank, in turn, has to borrow a fraction of their funds from
the central banking system so that they can turn around and obligate YOU
in your pursuit of the “American Dream.”

Does this sound outlandish or confusing to you?

Let’s analyze this in as simplified terms possible:

Fiat currency = money backed by nothing more than the value it has
printed on it. Because it is not backed by a substantial commodity, it
is in essence an agreed upon fiction…in which parties exchanging fiat
currency for goods or services agree to the value of that currency. Now,
because fiat currency is only worth what the issuing institution says
it is, there is absolutely NO check on that institution arbitrarily
printing up more of it whenever they feel like it. In essence, fiat
currency allows unlimited “printing” power.

However, most people think that the Federal Reserve prints the
nations money supply and distributes the currency to the banks to
circulate throughout the economy. What the Fed prints and distributes is
but a fraction of the so-called “money” supply. (More like the “credit
enslavement ratio.”)

Fractional reserve lending means a bank need only hold approximately
10% of money in an account at any time. So if you deposit $100 into an
account, the bank need only hold $10 in reserve and lend out $90. This
doesn’t sound so bad, right? Except that’s not how they do it. The bank
takes your $100 and puts it on their assets side of their ledger. They
now have 10% of a $1000 reserve requirement. So now they can turn around
and get your fellow debt slave to sign up for a used car loan of $1000.
In this way, $900 of fiat currency is “created” by the click of a
banker’s mouse and your signature on the loan forms dotted line.

Ahhh, but it doesn’t end their either. See, the bank calculates it’s
“reserve” by including all promissory notes, all credit accounts as
“assets” which allows them to “create” even more fiat currency at the
click of a mouse.
That $1000 loan ( which originally came from that first $100 deposit)
has paperwork in which the loan taker is obligated to repay at interest
over a set period of time. For the sake of simplicity, let’s just say
that at the end of the terms of agreement, after adding up the interest
and the principal, the debtor will have ended up paying back $1500.

Before the $1000 debtor even issues a single payment, the bank now
has $1500 promissory note…which they than account for as a $1500
asset…which is 10% of a $15,000 reserve level.
Along comes Joe Blow the entrepreneur, who wants to start an internet
porn business. He needs 15 grand to start up, so he goes and gets a
loan from the same bank.

After signing his name on the dotted line, he now has a loan that
when all is said and done, will gain the bank $20,000…which of course,
is now a bank “asset” that is now a 10% reserve level for $200,000.
Here comes the next guy, and he wants to buy a house for $200,000…so he signs up for a 30 year mortgage….

Are you starting to get the picture about how fiat currency and
fractional reserve lending actually work? From an initial $100 of actual
cash from a bank depositor, a bank was able to leverage a 6-month $1500
debt obligation from one worker; a 5-year, 20,000 start-up debt
obligation from a wannabe Larry Flynt; and a 30 year, $200,000
obligation from would-be homeowner. What started out as $100 of cold,
hard cash from a single depositor, turned into $235,000 of owed debt
servitude over the course of many years by three other people.

This is precisely why the credit card companies (i.e. the huge,
National Banks) are so eager to sign everyone up for credit cards, and
they really don’t care if you max them out and are unable to pay them
back. Your $20,000 credit card bill, while it exists on their ledgers as
current and not in default (it takes you not making any payments for
months on end before it becomes “default”), that $20,000 figure is a
potential $200,000 reserve loan to some other would-be debt serf.

All of these people, pursuing some aspect of the American Dream,
obligated to the bankers who did nothing more than click a mouse and get
the unknowing serfs to sign their name on the dotted line. Oh, and note
what happens when a home "owner” serf defaults on his home loan, and
the bank forecloses. They’ve now turned their fictionally created “fiat
currency” into a tangible, real asset – the seized home.

In this way, our Feudal overlords send fiat currency downwards, while
the real wealth moves upwards to them – the class of people who have
the power to “create” money.

Now some caveats here – this is a very very simplified explanation
for how fractional reserve lending and fiat currency have ensnared the
vast majority of the country into unwitting, financial serfdom. Of
course there are many variations, and all sorts of complicating
factors…but the general overview is a fairly accurate summation of the
system’s basic function.

This is precisely why inflation has occurred, devaluing the US Dollar
exponentially ever since the Federal Reserve system was instituted in
1913. 1929% inflation since 1913. {This was the percentage when this post was originally published at The Spearhead in 2010. As of 2015, it now stands at 2275%!} As money continually gets “created” by these corrupt banking practices, it
puts more and more “money” into circulation, devaluing the purchasing
power over time.

99% of us in America are in some way, shape or form, a serf for the
bankers, because they have the power to “create” money out of thin
air…by creating a debt obligation for which you must labor to pay off
over the course of your working life.

And all these bankers did was click on the mouse and get you to sign on the dotted line.

With fiat currency working in tandem with fractional reserve lending,
and we now have the means of ensuring that almost ALL business
endeavors, all personal consumption choices, and almost all manners of
subsistence are essentially done via debt to the bankers.

Remember the old saying…”He who has the gold, makes the rules?”

The new one is “He who prints the fractional-reserve, fiat currency enslaves the fools!”

Now get back to work! You owe it to our Feudal Overlords!

Notable Commentary from the Original Post

BobbyL July 24, 2010 at 12:00

Well said Hawaiian Libertarian. This was spelled out in Carroll Quigleys books in the early 60′s (The anglo-american establishment). As long as the bankers are in charge we will remain Slaves.

Paul Elam July 24, 2010 at 12:12

Exceptional and well articulated. I wish that more of these articles were in mainstream, but I fear the same forces that prevent Welmer from being featured in the NY Times are at play here.

You are writing against the people who own the system that is enslaving everyone.

The Contrarian Expatriate July 24, 2010 at 12:21

True indeed. I talked about the same issue in my last video. Unfortunately, the forces of retail consumption are too powerful to convince Americans to save.

US dollars are not the worst way to save so long a smattering of gold, silver and other currencies are in the mix.

Epoche* July 24, 2010 at 13:01

here is a line about slavery/serfdom from a conservative theorist Dr Kenneth Minogue:

"It is this element of dehumanization that has produced what I am calling “the servile mind.” The charge of servility or slavishness is a serious one. It emerges from the Classical view that slaves lacked the capacity for self-movement and had to be animated by the superior class of masters. They were creatures of impulse and passion rather than of reason. Aristotle thought that some people were “natural slaves.” In our democratic world, by contrast, we recognize at least some element of the “master” (which means, of course, self-managing autonomy) in everyone.

Indeed, in our entirely justified hatred of slavery, we sometimes think that the passion for freedom is a constitutive drive of all human beings. Such a judgment can hardly survive the most elementary inspection of history. The experience of both traditional societies and totalitarian states in the twentieth century suggests that many people are, in most circumstances, happy to sink themselves in some collective enterprise that guides their lives and guarantees them security. It is the emergence of freedom rather than the extent of servility that needs explanation."

Epoche* July 24, 2010 at 13:06

It is ironic that you mention serfdom, medieval serfs didnt pay as much taxes as a man does under a modern welfare state. (Not to mention men paying child support). If we are to believe numerous various writers it was understood that men under serfdom would pay a maximum of 30 percent of the agricultural product to the lord or they would kill the lord. Even the vassal knew of the law of diminishing returns and the importance of not “eating the seed corn”. Many ancient lessons have been unlearned.

JohnJ July 24, 2010 at 14:22

It’s worth remembering that the Federal Reserve was created by the federal government in 1913, and they wouldn’t be able to do what they do without the government’s backing. The problem is worse than bankers; it’s government-owned bankers.

James July 24, 2010 at 14:49

That’s why it’s called the ‘American Dream ™’;
Because you’d have to be asleep to believe it.

-

Avenger July 24, 2010 at 15:09

Cloud wrote-Similar laws exist in California and Massachusetts

What are those laws? I’d be curious to know.

Davidge July 24, 2010 at 15:15

You can only be a slave to the debt system if you buy into it.

It has taken some work, but I am debt free other than my mortgage and I am targetting that next. I think we need to think like our grandparents generation more. Their attitude was “If you need credit to buy something you want then you can’t afford it”.

1) Start by eliminating your credit card debt. They interest on those can be incredibly high!

2) If you are making large car payments, then sell it! Buy a beater. You can get a nicer vehicle with cash once you are debt free. Put the money you save on payments against the credit cards and other loans.

3) Kill of other loans and then go for that mortgage!

A man who is debt free is also free to make other life decisions!

Epoche* July 24, 2010 at 16:15

as von mises wrote in one of his earliest book, the function of banks is to serve as a intermediary using property rights and law to profit from the time value of money, between savings and profit from investment. In todays and age, there really is no such thing as accountability for banks in any way, shape or form. The new function of banks is to serve as a payment processing center this is because of fdic insurance. Citibank should have gone bankrupt but it will not, there are no limits to the moral hazards that banks can impose on us.

Gx1080 July 24, 2010 at 16:18

So….basically, the credit card industry is a pyramid scheme designed to get as much money from people as possible by using overly drawn-out interests.

It wouldn’t bother me as much if it wasn’t for all the brainwashing done for the Lamestream media to get people to buy that scam.

Jabberwocky July 24, 2010 at 16:40

He’s saying they illegally/unethically move the 100 dollars to the otherside of the ledger, not just loan out 90 of it, but say the whole 100 represents the 10% minimum assets vs loans, then they are able to borrow 1,000 from the federal reserve to loan out. Repeat. Rinse.

Tim July 24, 2010 at 16:48

This is precisely why inflation has occurred, devaluing the US Dollar exponentially ever since the Federal Reserve system was instituted in 1913. 1929% inflation since 1913. As money continually gets “created” by the corrupt banking practice, it puts more and more “money” into circulation, devaluing the purchasing power over time.

This was a grand slam, Hawaiian Libertarian. Excellent article. I remember vacationing in Thailand back in 2000-2001. The U.S. dollar was equal to 50 Thai baht. Now the greenback is trading for 33 Thai baht. When will Americans wake up, when it goes down to 25 Thai baht? 20?

This isn’t just another recession we’re in. This is big time restructuring. There won’t be another economic boom for a very very long time. My guess is twenty years.

tweell July 24, 2010 at 18:32

Hawaiian Libertarian’s description of fractional-reserve banking is obviously not close to the textbook definition. However, I’d bet that what he has described is close to how many banks have been operating. Since having a 10% reserve is considered excellent by the Fed, lots of banks have engaged in accountant shenanigans in order to look like they’re in good shape. How else do you have banks that are listed at 10% and taken over just days later? Barring a run on the bank, the only possibility is that they were using Enron accounting.

Precious metals have been used for money because they are rare, look pretty and have an infinite shelf-life. Inflation was curbed because there’s only so much gold and silver around. Nowadays they have intrinsic value of their own – gold plated electronics are resistant to corrosion and silver is the most electrically conductive element, so both are used in industry.

Hawaiian Libertarian’s final point is quite valid. Go into debt only when you have to, and only as little as you have to. The only ‘good’ debt is when that borrowed money is making more than the interest that you are being charged. This does not hold true for cars, houses, vacations, appliances, fine dining, etc. It used to be true for education, but I’d want to run a cost/benefit analysis before going into debt for school. I have never owned a new car or a new house, but I don’t have car or mortgage payments. The credit cards get paid off every month. Don’t work for the banks, work for yourself!

the universe July 24, 2010 at 19:48

From my understanding of the system that HL writes about the fractional reserve method looks something like this:

$100 can become $1000 by keeping the original $100 as a cash pile to back up $900 in new loans to others. The original $100 is a fractioned (1/10th) real amount held as a reserve to justify new loans of $900 to others. (Or bank keeps $10 and loans out $90. Same thing)

The other loaned $900 doesn’t actually exist as paper or cash but exists as fictional numbers to be paid back by money borrowers. The borrowers pay back real money (principal borrowed amount + interest) to the fictional bank created loan numbers. Pure exponential profits for a bank. Hard time for the borrower of fictional money.

Anyway, this isn’t based on science but how fractional reserve appears to me.

Furthermore, banks gamble on whether the borrowers of real and fictional bank money can pay the loan(s) back. If massive amounts of people default on their loans, banks go under because of the borrowed money banks owe other larger banks. And, if people, en masse’, decide to withdraw their money from their banks, there wouldn’t be enough money in reserve to pay back all people. Both instances can topple a bank and create a resounding ripple effect in the banking and financial system.

Again, just a view.

irlandes July 24, 2010 at 20:49

Sorry, sports fans, HL is exactly right at least at the first degree. If you want to learn more, it’s called something like, “Creating demand deposits.”

Back in the early 70′s, a man at work told me (using the 10% reserve example) that if I deposit $100 in the bank, they keep it as the 10% reserve, and simply create $900 out of thin air, and loan it out.

I told him he was crazy as a loon. I said with a 10% reserve they could only loan out $90. I didn’t eat loon, but after investigating, I did eat a lot of crow. That is EXACTLY how it works.

Those of you who said what I said nearly 40 years ago, need to get better informed as I did.
http://en.wikipedia.org/wiki/Deposit_account

I looked into this and the last thing the system wants is for the sheeple to pay down debt. I saw a article in a Saturday paper (the slightly more real economic detail are published on Saturday) that in Australia a high percentage of people were paying down their home loans early.The reality is that if you ever won the lottery (assuming you play) the worst thing you could do is withdraw it all and bury it in a field.No propping up stock Market or property bubbles, no spending on unnecessary things, no additional money for government in taxes and, most importantly, no fractional lending for banks.

I looked into this and the last thing the system wants is for the sheeple to pay down debt. I saw a article in a Saturday paper (the slightly more real economic detail are published on Saturday) that in Australia a high percentage of people were paying down their home loans early.The reality is that if you ever won the lottery (assuming you play) the worst thing you could do is withdraw it all and bury it in a field.No propping up stock Market or property bubbles, no spending on unnecessary things, no additional money for government in taxes and, most importantly, no fractional lending for banks.